When it comes to sourcing a
particular category, there isn't a one-size-fits-all approach for achieving
desired results. Sourcing a category
such as office supplies may be as simple as selecting a market basket of high
volume products, releasing the items via request for proposal (RFP), collecting
responses, and awarding business to the most cost competitive supplier that
aligns with company needs. More complex
categories, however, take careful planning and execution to take products to
market. Sourcing initiatives that prove
to be more complex are categories with custom components that have been
designed or engineered specifically for a company. This includes direct materials, such as custom
electronic components as well as indirect materials such as custom printed packaging
products.

Even if a sourcing event in a complex
category is not in the pipeline, there are a few best practices that can be followed
to ensure a successful for transfer of business should an interruption in the
supply chain or an optimal sourcing opportunity arise.

Open communication is important
throughout an RFP process as suppliers will be submitting a stream of questions
surrounding the products in the market basket.
While a liaison in the purchasing department may be able to answer
questions around process or overall firm expectations, it will ease the process
if the facilitator of the RFP is also confident in their knowledge of the needs
of the departments with a stake in the initiative. In order to efficiently respond to a supplier’s
more in depth inquiries, the procurement leads should know exactly who the department
contacts are for each individual question area before an RFP is released. This level of communication should be
maintained whether or not a change in purchasing needs has been identified.

2.Keep a detailed record of product specifications.

When it comes to sourcing custom products,
a supplier can only submit pricing as accurate as the available specifications.
If the drawings on file to not contain
complete information, assumptions will need to be made either by the sourcing
team or a participating supplier, and price adjustments will occur after the close
of the initiative. This can lead to
inflated pricing or the discovery that your selected supplier cannot meet the
exact specifications required for a particular product. To avoid these roadblocks, store information
in an accurate and easy to read manor.
Make sure that all part revisions are carefully documented and product specifications
are updated accordingly. Finally, ensure
that you have full ownership of any design files associated with custom
products so as not to risk a delay in process due to a supplier owning your
specifications.

3.Keep a schedule of items in obsolescence.

If a product has a planned
obsolescence date, this information is necessary for building out proper
volumes within the market basket. If
there are upfront non-recurring engineering costs involved in transferring the
business, it is not worth the resources involved to source this item from an
alternate supplier. Rather, the
replacement product should be considered, despite purchasing not beginning
until long into the future.

4.Keep an updated record of verified pricing.

When comparing market conditions
to your current state, it is important that you have an accurate record of cost
for the items being sourced. Especially
in industries of constant fluctuation, having a consolidated record of last
price paid will streamline your baselining process. Another important metric to track is the
results of any special pricing agreements or rebate structures in place with
current suppliers. Ensure that the actual
price paid or rebate being received matches the language in the agreement, and
adjust accordingly if this is not the case.
This will lead to not only correct comparisons of price after a sourcing
event, but also full compliance of the current supplier.

5.Track purchasing trends.

Keep a detailed record of how
often you are purchasing items, and the volumes associated with each purchase
order. When going to market with an
item, purchasing frequency and average purchase volume will help suppliers determine
how to provide optimal pricing based on minimum order quantity requirements and
freight costs. If volume increases are
expected based on predicted growth within a company, reflecting those volume
changes will open opportunity for more competitive supplier bids. Diametrically, if a volume decrease is
expected and not reflected in the market basket, suppliers may raise pricing
based on a failure to meet minimum order quantities. It is not enough for those who work directly
with the material being sourced to have an idea of the seasonality of the
products, trends need to be tracked consistently and data needs to be shared
with all involved parties.

The above best practices all focus
on maintaining clear and consistent purchasing records and integrating these
records with the most up to date product specifications. It is far too time consuming to gather this
information directly before a sourcing event, and if procurement and outlying
departments are unable to work together the items being taken to market may be
inconsistent with organizational needs.
Supply chain interruptions or immediate needs for cost reduction are not
uncommon, and being prepared to take items to market efficiently and accurately
will set you up for continued success.

Source One's Strategic Sourcing experts will be at ISM2016, where Source One is the exclusive sponsor of the Exec IN forum. Want to save on registration costs to attend this landmark event? Learn more over at SourceOneInc.Com.

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Source One is a leading procurement services provider. Since 1992, Source One has been providing companies in all industries with sourcing services including BPO, Benchmarking, Spend Analysis, Category Support, and RFX Management.